Pig farmer must invest in tax benefits

With the pig prices of 2016 and 2017, the profit of many pig farms is increasing. So it's time to look at options that reduce the tax burden.

The agricultural sector is characterized by high investments in buildings, production rights and machines. This means that tax investment schemes are of great importance. One should think of arrangements for arbitrary depreciation (WASO and VAMIL) and investment deduction (EIA and MIA).

Where application of the WASO and VAMIL leads to accelerated depreciation of business assets, the EIA and the MIA form an additional deductible item that is deducted from the taxable profit. With a well-considered application, the taxable profit can be 'planned', so that the tax burden decreases.

Ready to invest?
Nevertheless, the entrepreneur can at a given moment be 'out-invested', as a result of which the investment facilities disappear and the taxable profit increases. Upscaling then means that taxable profit increases explosively at higher prices.

It will then be necessary to look for another possibility to dampen the tax levy. This can be done, for example, by changing the legal form of the company. One can think of the silent contribution of the company in a private limited company (eg). Profits up to €200.000 are then taxed at the favorable rate of 20%. Any losses incurred in the company before the contribution to the BV can be set off against the wages received from the BV.

Enter into a general partnership
After a few years it is possible to enter into a general partnership (VOF) with the entrepreneur and the BV. The company is hereby contributed by the BV to that general partnership. Within this general partnership, the profit is divided among the partners. The profit share accruing to the BV is taxed for the first €200.000 at the favorable rate (of 20%).

It is a hybrid structure, in which the combination of income and corporation tax leads to the most favorable result. In fact, you combine the best of 2 worlds. Good tax guidance is necessary in this regard, so that the fiscal preconditions can be met.

This article is from 'Pig Market, the Analysis 2017'. Click here to receive the magazine.

Alice Fisher

Alies Visscher is a tax lawyer at Countus. She studied tax law at Utrecht University and University of Amsterdam and advises entrepreneurs in small and medium-sized enterprises, including those in the agricultural sector.

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